Bank of England is wrong on accounting rules, says Sir David Tweedie

Directors at the Bank of England have got it wrong in demanding changes to
accounting regulations, Sir David Tweedie has claimed, in a move that
exposes a growing rift between regulators on measuring risks at British
lenders.

Sir David Tweedie former chairman of the International Accounting Standards Board has defended the controversial International Financial Reporting Standards (IFRS)Photo: Cathal McNaughton

Sir David, who was chairman of the International Accounting Standards board for 10 years until 2011, has attacked the Bank’s Financial Policy Committee (FPC) for concluding that accounting rules have allowed banks to “overstate profits.”

He told the accounting sub-committee of the Parliamentary Commission on Banking Standards that the FPC was wrong to think the International Financial Reporting Standards (IFRS) prevented banks from making proper provisions against bad loans.

When Lord Lawson, chairman of the sub-committee, pointed out that the FPC was a “respected authority”, Sir David retorted: “It doesn’t mean they are right.”

He admitted that in 2008, the IASB recognised that banks needed to make more provisions. However, he insisted that it wasn’t the rules at fault but banks and their efforts to get around them. He insisted that the standards, which he helped introduce into the UK in 2005, “could of and should have worked...we expected [them] to work... but “behaviourally it wasn’t working.” The IASB “moved quickly” to address the problems, he said.

Sir David, who is now chairman of the Institute of Chartered Accountants in Scotland (ICAS), claimed that bank practises that were frowned on in Scotland and elsewhere in England were “considered damn good business in City London.”